I help set rates for a Major Canadian Insurance Company! Some thoughts . . .

[VifferFun]

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Of course it's not worth it... to YOUR profit margin. Talk 100,000 policy holders into paying $22 more a year and that's 2.2 million more in YOUR pocket. LOL at "if you don't understand, then just believe us", you sound like a politician... and they never lie!

I'm speaking as a fellow rider, not as an insurance company. If I thought a specific coverage was a rip off I would just tell you so.

$2.2M more in my pocket? You are forgetting that the exposure/risk to the insurance company is increased when the limit is increased. If you look at the industry statistics I posted, here's a little bit of simple math:


GIVEN:

A) Probability of Liability claim exceeding $500K: 0.005%
B) Number of Liability Claims: 323,512
C) Total Liability Claim Amount: $4,120,365,000
D) Number of Insured Vehicles with Liability: 11,108,517
E) Cost to Increase Liability Limit from $200K to $1M with Jevco: $22


CALCULATION: Financial Gain In Premium by Increasing Limit from $200K to $1M

M = D*E) Overall Gain in Premium due to Increased Limit: $244,387,374

Therefore, the insurance industry would receive an additional $244M in premiums if everyone increased their Liability limit from $200K to $1M.

CALCULATION: Extra Losses by Increasing Limit from $200K to $1M:

R = A*C) Number of BI claims exceeding $500K: 1,618
S= R*[500K-200K]) Min Total Payout in Excess of $200K: $485,400,000

Therefore, the insurance industry would pay out an additional $485M in losses if everyone increased their Liability limit from $200K to $1M.


CALCULATION: Financial Gain/Loss to Insurance Industry by Increasing Limit from $200K to $1M:

T = M-S) Financial Gain to Insurance Industry by Increasing Limit: 1,618
U= T*[500K-200K]) Min Total Payout in Excess of $200K: -$241,012,626

Therefore, the insurance industry would be LOSING AT LEAST $241M if everyone were to switch from a $200K limit to a $1M limit. And this calculation is completely excluding the losses in excess of $500K!



To balance out the equations, this really means that the Jevco rebate of $22/year is not high enough (i.e. they are overpriced for the $200K limit). Again, a little bit of more math:


CALCULATION: Realistic Rebate for Dropping from $1M to $200K:

W = S/D) Realistic Rebate for Dropping Liability Limit from $1M to $200K: $43.70

Therefore, Jevco should really be issuing a rebate of at least $43.70/yr rather than $22.00/yr for policyholders who decide to lower their limit of liability from $1M to $200K. Even if this were the case, it would still not be worth lowering your limit. I am guessing that Jevco doesn't give the full $43 rebate in an effort to discourage people from making the poor and uninformed decision of lowering their liability limit to $200K.


So, Gnu, do you still think I am giving you a biased opinion? Am I lying to you like a politician? If I really wanted the insurance industry to have more money in it's pocket, I would be heavily persuading you to reduce your limit to $200K.

Cheers!

 

[LiNK666]

This is a bit off topic. Just out of curiosity what are the profit graphs for insurance companies for the last 5-10 yrs?

 

[VifferFun]

This is a bit off topic. Just out of curiosity what are the profit graphs for insurance companies for the last 5-10 yrs?

The following link (Adobe PDF) gives a good explanation of the cyclical of insurance profits:

http://www.thedominion.ca/web/download/Explaining the Insurance Industry.pdf

Over the last 20 years or so, the average Return on equity has been about 10%, which is not too bad, but not excessive either. The last three or four years has been a period of excellent profit (we were in the good cycle), but beginning this year we are entering back into the period of poor profit (the bad cycle). You can see a graph of industry profits on the first page of the link. Note however that these are the industry results . . . some companies may have performed much better, and some much worse (with possible LOSSES).

Cheers!

 

[johnp]

Here's an idea how to save money on bike insurance.

I suggest that you insure yourself only against risks that are catastrophic to you. It stands to reason that insurance companies 'overcharge' to assume your risks. In other words they HAVE to charge more than the risk costs - otherwise they wouldn't be able to stay in business.

It wouldn't make sense for Bill Gates, for example, to get house insurance. If his house burned down it wouldn't change his life at all so why pay MORE than it's worth for someone else to take on the risk.

So for example, you may not need to insure your bike against collision, theft, comprehensive because although it sure would hurt if you lost the bike it wouldn't wipe you out. Liability on the other hand would indeed wipe you out so you get that - $1 million at least. Take the $$ difference & buy yourself an alarm and big mother locks . And you'll still have $$ left over for other gear.

You take risks all the time. Some you can afford to take and others you can't. I doubt we can afford the liability risk but some of us could lose the bike without getting wiped out.

 

[VifferFun]

Here's an idea how to save money on bike insurance.

I suggest that you insure yourself only against risks that are catastrophic to you. It stands to reason that insurance companies 'overcharge' to assume your risks. In other words they HAVE to charge more than the risk costs - otherwise they wouldn't be able to stay in business.

It wouldn't make sense for Bill Gates, for example, to get house insurance. If his house burned down it wouldn't change his life at all so why pay MORE than it's worth for someone else to take on the risk.

So for example, you may not need to insure your bike against collision, theft, comprehensive because although it sure would hurt if you lost the bike it wouldn't wipe you out. Liability on the other hand would indeed wipe you out so you get that - $1 million at least. Take the $$ difference & buy yourself an alarm and big mother locks . And you'll still have $$ left over for other gear.

You take risks all the time. Some you can afford to take and others you can't. I doubt we can afford the liability risk but some of us could lose the bike without getting wiped out.

Very well put, johnp.

I usually recommend against the Collision coverage if you can afford the loss of your bike in the event that you are in an AT-FAULT accident. I don't purchase Collision coverage on my own bike. I like to keep Comprehensive coverage because bikes are rather small and easy to steal or tip over and vandalize.

Definitely get at least $1M liability, and preferably $2M (as I already explained). I doubt that many of us on this forum have that kind of coin to shell out if it comes down to that.

Cheers!

 

[mat2312]

I'm not sure I understand the difference between Liability and Accident Benefits.


If Ontario has 'no-fault' insurance. Wouldn't a person's own accident benefit coverage cover their medical/disability bills?

So if you were infact involved in an at-fault MVA, are you saying the only thing liability does is protect me from being sued for pain and suffering?



Also, because motorcycles are limited in their capacity to carry passengers wouldn't their Accident Benefit premiums be significantly less?

 

[VifferFun]

I'm not sure I understand the difference between Liability and Accident Benefits.

If Ontario has 'no-fault' insurance. Wouldn't a person's own accident benefit coverage cover their medical/disability bills?

So if you were infact involved in an at-fault MVA, are you saying the only thing liability does is protect me from being sued for pain and suffering?

Also, because motorcycles are limited in their capacity to carry passengers wouldn't their Accident Benefit premiums be significantly less?

Good questions . . . this is quite a confusing topic.

Yes, you are correct; if you hit someone else their own Accident Benefits coverage will cover their personal medical bills. In the event that their loss is substantial and the accident was your fault, their insurance company will sue yours to recoup the costs. The money paid in the settlement from your insurance company to their comes for the Bodily Injury coverage.

Yes, motorcycles are limited in their capacity to carry passengers (although when I was in the Dominican Republic it was common to see a family of four on an 80cc bike! ). However, the potential for substantial injuries even in a minor rear-ending incident is quite large. I believe that the increased change of injury compensates for the fact that you can only carry two passengers.

Cheers!

 

[johnp]

I'm not sure I understand the difference between Liability and Accident Benefits........?

I stand to be corrected but I think the following:

Liability benefits kick in only if you get sued. The other insurance benefits are reimbursement for expenses, damages. Liability insurance is required (min $200K) and the other kinds of insurance is not.

Let's suppose you rear-end another motorbike and you both get hurt and both bikes get totalled. Let's assume that you have only Liability insurance. The accident is your fault.

Someone will have to help with this but I think the following describes how it plays out.

OHIP coverage is all you've got for your own medical expenses and you will have to buy a new bike with your own money. The other guy is covered for his bike and his own medical expenses by his own insurance & OHIP.

If the other guy is very badly injured and requires e.g. long term care and decides to sue you you're covered by your Liability insurance. The point is that nobody sues for only $100K and anybody can sue anybody anytime. If you don't have enough liability insurance, you're own life will never be the same. Simply defending against a lawsuit, even if you win at the end, can easily cost you $50K - and you need to pay that to win.

It also sounds from VifferFun's last post that the other guy's insurance company may also sue you to recover what it considers to be excessive medical expenses. It also sounds from VifferFun's post that Liability insurance may not cover that particular lawsuit but I'm not sure if I'm interpreting that right.

 

[VifferFun]

I stand to be corrected but I think the following:

Liability benefits kick in only if you get sued. The other insurance benefits are reimbursement for expenses, damages. Liability insurance is required (min $200K) and the other kinds of insurance is not.

Let's suppose you rear-end another motorbike and you both get hurt and both bikes get totalled. Let's assume that you have only Liability insurance. The accident is your fault.

Someone will have to help with this but I think the following describes how it plays out.

OHIP coverage is all you've got for your own medical expenses and you will have to buy a new bike with your own money. The other guy is covered for his bike and his own medical expenses by his own insurance & OHIP.

If the other guy is very badly injured and requires e.g. long term care and decides to sue you you're covered by your Liability insurance. The point is that nobody sues for only $100K and anybody can sue anybody anytime. If you don't have enough liability insurance, you're own life will never be the same. Simply defending against a lawsuit, even if you win at the end, can easily cost you $50K - and you need to pay that to win.

It also sounds from VifferFun's last post that the other guy's insurance company may also sue you to recover what it considers to be excessive medical expenses. It also sounds from VifferFun's post that Liability insurance may not cover that particular lawsuit but I'm not sure if I'm interpreting that right.

Good question/scenario, but you're not 100% correct. In your hypothetical situation, the following would take place:

YOUR SITUATION:

Both Liability AND Accident Benefits are mandatory coverages. In your situation, your injuries/disability payments will be paid through Accident Benefits, not OHIP. Since the accident was your fault and you do not have Collision coverage, I'm afraid that you must foot the bill for repairing your bike. Because the accident was your fault, it will count against you for insurance rating purposes. Just FYI, all insurance companies in Ontario MUST submit a portion of all premium collected to OHIP as well (called the Health Services Levy).

THE SITUATION FOR THE PERSON YOU REAR-ENDED:

Accident Benefits will pay for their injuries/disability payments. Since the losses are fairly substantial, their insurance company will likely sue your insurance company to recover costs in a process known as subrogation. The amount of money that your company is sued for is paid out by the Liability coverage. Since the accident was not their fault, the physical damages to their bike will be covered by Property Damage, another mandatory coverage that has a $0 deductible. They don't need Collision coverage in this case, because the accident was not their fault. Also, because the accident was not their fault, it will not count against them for insurance rating purposes. Suppose they sue your company for $450K but you only have a $200K liability limit . . . since your limit is only $200K, you are PERSONALLY on the hook for the addition $250K. If you are incapable of paying out the full amount, the insurance company will sue you for all you own and then pay out the rest of the claim using the Uninsured/Underinsured Motorist coverage (which is also a mandatory coverage).

It doesn't take much for a claim to exceed $200K when injuries are involved, so once again I re-iterate the importance of getting at least a $1M (or preferably $2M) liability limit!

Cheers!

 

[rukus]

pain and suffering alone can break $300k

 

[johnp]

Is it true then that if:

[1] I drop both Collision and Comprehensive and
[2] get adequate liability and the minimum mandated Accident Benefits

that the worst that can happen is that I have to replace my own bike?

 

[VifferFun]

Is it true then that if:

[1] I drop both Collision and Comprehensive and
[2] get adequate liability and the minimum mandated Accident Benefits

that the worst that can happen is that I have to replace my own bike?

Even if you purchase a $1M or $2M liability limit, there is still a very minute chance that your claim could exceed the limit (but I wouldn't worry about this).

Depending on the company you are with, the disability payments might not be as high as you would like (part of Accident Benefits) so you might want to increase this coverage as well. If you are pulling in six figures, it won't replace your salary, but it will be adequate if you work at McDonald's. Discuss this with your broker/agent so that you know the details, or look at your contract.

I believe you are correct . . . the worst that can happen to you *financially* is lose your bike or don't get as high of an Accident Benefits payout as you would like. However, more realistically, the absolute worst thing that can happen is that you die, or have to go on life support, so we still have to ride safe

Cheers!

 

[VifferFun]

pain and suffering alone can break $300k

Indeed . . . I have heard of a Canadian receiving a settlement in court for over $400K because their quality of life decreased as a result of losing their "golf swing" in an accident.

Cheers!

 

[mat2312]

Indeed . . . I have heard of a Canadian receiving a settlement in court for over $400K because their quality of life decreased as a result of losing their "golf swing" in an accident.

Cheers!

and this is what needs to change


There should be SOME assumed risk when you get into a vehicle. It's about time people take responsibility for their own actions.

I think the roads would be a bit safer if there wasn't an Insurance "Protector" there to benefit people if they get into an accident.

I am not advocating the full removal of insurance but the government should put some hard limits on how much money people can get.


I know a lady who recently got a settlement in the millions for a car accident. She was seriously hurt (not critical) and went through alot but should she really have received 3+ million dollars for that? she couldn't earn that in a lifetime.

 

[VifferFun]

I am not advocating the full removal of insurance but the government should put some hard limits on how much money people can get.

You are exactly right! This is the way that the government can do their part to combat rising insurance rates! Rising insurance rates are a direct result of rising insurance settlements. If the court grants a settlement, we have to pay it.

In 2004, the Alberta provincial government had put a cap on soft tissue bodily injuries (whiplash, etc.) and that really helped to control costs and reduce rates in that province. However, it sounds like an Alberta judge recently struck it down about 5 months ago, so rates will increase again:

http://www.cbc.ca/canada/calgary/story/2008/02/08/insurance-ruling.html

On the flip side, the government of Alberta has also implemented some really stupid rules (called the "Grid", not going into details here) so that we are forced to give people with horrible driving records (for example three DUI's and a couple of accidents) a rate that is not much more than someone with a clean record. That's just ridiculous! Insurers will withdraw from the province altogether if the government makes the industry unprofitable, and less competition is never a good thing.

Cheers!

 

[rukus]

had put a cap on soft tissue bodily injuries

i dont think you realize how much damage can be done via soft tissue injuries.

There should be SOME assumed risk when you get into a vehicle. It's about time people take responsibility for their own actions.

so a motorcyclistin an accident shouldnt get proper recovery because they 'assume risk' when riding?

should put some hard limits on how much money people can get.

there are already hard limits on recoveries. does 300k for pain and suffering seem fair for a young ventilator dependant complete quadriplegic who will never achieve their goals in life due to someone elses ignorance?

the absolute worst thing that can happen is that you die,

and that is a best case scenario for an ins. company. it would cost a lot more to rehabilitate an injured person vs. a payout for death.

 

[invictus43]

I am not advocating the full removal of insurance but the government should put some hard limits on how much money people can get.


I know a lady who recently got a settlement in the millions for a car accident. She was seriously hurt (not critical) and went through alot but should she really have received 3+ million dollars for that? she couldn't earn that in a lifetime.

You might think differently if it's you. Suppose you are riding and through someone else's negligence you are very seriously injured..you can't sleep properly anymore, you have trouble concentrating from a head injury, you lose your job... What now? You'll accept only $20k? $50k? What's it worth? Your whole life has been destroyed. I'm just asking the questions. I agree there is an inherent risk..and we accept the risks despite the fact there are very serious consequences. I just don't know how you decide an arbitrary limit on damages.

 

[VifferFun]

You guys are all correct . . . it really is tough to put a dollar amount on some of these losses. I know that there is no amount of money that I would gladly exchange for the loss of some physical abilities that most of us take for granted. I think it is fair, however, to put a cap on some of the more minor injuries (soft tissue) which are milking the system ALL of the time.

Yes, it is true that the auto/bike insurance company is better off financially if the insured dies rather than going on life support. It sounds really morbid, but it's true. When I said that the worst case scenario is that you die, I was speaking from the perspective of the insured.

Cheers!

 

[dropgear]

I'm actually OK with insurance being high, the cost of driving being high, etc. to cover the cost of insurance payouts.

Four wheeling 2.5 tonnes of metal at 100kph isn't a sustainable form of transportation; and duh, it ruins a lot of lives daily. My ability to function is probably worth $2 mill to me and my family .. the odds of be being hurt in this way on a train are slim to none (compared to the risk on a bike, or even in a car).

 

[rukus]

put a cap on some of the more minor injuries (soft tissue) which are milking the system ALL of the time.[/QUOTE]

blatant lie. thats an excuse for the ins. co to incrfease rates. ins. fraud. the adjusters should do a better investigation.
An ins co wastes so much money trying to stop a person from gettting what they deserve.

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